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Forex − Dollar rose broadly on Friday in thin trade

Mon, Jan 5 2009, 10:45 GMT
by Peter Rosentreich

ACM - Advanced Currency Markets

Forex News and Events:

The Dollar was firmer on Friday as investors sold the Euro after data showed deepening recession in the euro zone. Demand for the single currency also fell as traders deemed the Euro's rapid advance versus the greenback last month was unsustainable. Thin trading volumes during the holidays may exacerbate currency moves, they added. Investors have recently shifted from Dollar into Euros as the US Federal Reserve cut interest rates to near zero, while the European Central Bank has adopted a more gradual approach to cutting interest rates.

Euro-zone manufacturing activity fell to the lowest in the survey's 11-year history. The final reading of the Markit Euro-zone PMI (Purchasing Managers Index) fell to 33.9 in December, below market forecasts.

EurUsd was down 0.59% at 1.3920, having earlier hit a session low of 1.3840. UsdJpy was up 1.26% at 91.82, after trading as low as 90.67. GbpUsd was down 1.26% at 1.4548 after hitting 1.4377 low. EurGbp rose 0.65% at 0.9568. UsdChf rose 1.71% to 1.0835.

British mortgage approvals for house purchases fell to a record low in November, while a separate Bank of England survey showed credit conditions looked set to tighten further in the next three months. House prices also fell by a bigger-than-expected 2.2% in December, the country's biggest mortgage lender Halifax said. The figures reinforced expectations the BoE will cut key interest rates by at least 50bp this week from the current 2%.

US industry report showed factory activity fell to a 28-year low in December. The Institute for Supply Management said its index of national factory activity fell to 32.4, the lowest since 1980, from 36.2 in November.

Today's Key Issues (time in GMT):

00:00 SEK Market Holiday
08:30 CHF December PMI 34-8 vs 35.2
09:30 EUR January Euro-zone Sentix Index -44 vs -42.3
15:00 USD November Construction spending -1.3% vs -1.2%
00:00 USD December Domestic car sales 3.2m vs 3.29m
00:00 USD December Domestic truck sales 4.18m vs 4.26m

The Risk Today:

EurUsd Market traded as high as 1.4720 in December but reversed most of its gain around 1.4000. Uptrend remains and may open the way to 1.4867 23rd October high. A return over 1.5000 will clear the last 3-month pressure and may put key resistance 1.6000 into focus. Initial resistance holds 1.4363 last week high. On the downside, 1.3600, former resistances, hold supports. Further support holds 1.2208 trendline support. Next long-term support holds 1.1640 November 2005 low and therefore 1.0739 September 2003 low.

GbpUsd Market reversed most of Cable gains from mid-December and traded below 1.5000. On the downside, strong supports hold 1.4471 December low ahead of 1.3682 March 2001 low. Initial support holds 1.4383 yesterday low. Sentiment remains mixed but renewed strength may open the way to 1.6075 (38.2% retracement of 1.8669 – 1.4471 decline) and even 1.6570 (50% retracement). Uptrend may look for 1.6673 30th October high strong resistance. Further resistance holds 1.7816 (50% retracement of 2.1161-1.4471 decline).

UsdJpy UsdJpy is still under pressure in the last 4 months and traded as low as 87.14 on 17th December before recovering around 91 on Friday. On the upside, strong resistance holds 100 pivot point, but only a recovery over 103 upper trendline and 105 pivot point will put focus again on 108 and 110.67 15th August high. Initial resistance holds 93.91 ahead of 97.43 24th November high. Strong support holds 87.14. Further downtrend may open 79.70 April 1995 low.

UsdChf Market traded as low as 1.0373 late December in this months downtrend. It recovered up to 1.0848 on Friday. Uptrend may return over 1.1200 reopening the way up to 1.2298, 21st November high, and 1.2463 strong resistance ahead of 1.2506 (61.8% retracement of 1.4278 – 0.9639 decline). Former support 1.0955 holds minor resistance. Further weakness may open the way down to 1.0500 and 1.0375. Such a move may look for 1.0013 15th July low in front of 0.9637 17th March low.

Resistance and Support:

Published on  Mon, Jan 5 2009, 10:49 GMT